banner.visible = true buttons.visible = false banner.heading = banner.heading += Welcome! banner.subheading = We're really glad you're here. banner.subheading += banner.subheading += By the end of this you should understand how to think about investing using pictures. banner.subheading += banner.subheading += This should only take a couple of minutes. banner.nextButtonText = Next Page heading= subheading= notes= notes2= equityChart.visible = false pause fade banner.visible = false buttons.visible = true heading = Introducing investing in pictures subheading = Let's think about what an investment in the stock market looks like equityChart.showSeries = nodes equityChart.interactive = false equityChart.nodes = 0,0; 0.00001,0.00001 equityChart.visible = true pause notes = - Assume you have £100 invested in the stock market equityChart.labelPoints = -1 pause notes += - If stock markets rise 10%, it is worth £110 equityChart.nodes = 0,0; 0.1,0.1 equityChart.labelPoints = 0, -1 pause notes = - Assume you have £100 invested in the stock market notes += - If stock markets rise 20%, it is worth £120 equityChart.nodes = 0,0;0.2,0.2 pause notes = - Assume you have £100 invested in the stock market notes += - If stock markets fall 10%, it is worth £90 equityChart.nodes = -0.1,-0.1; 0,0; 0.2,0.2 pause notes = - Assume you have £100 invested in the stock market notes += - If stock markets fall 20%, it is worth £80 equityChart.nodes = -0.2,-0.2; 0,0; 0.2,0.2 pause notes = So these pictures show: pause notes += - Left and Right is the change in the stock market pause notes += - Up and Down is what your investment is worth pause notes = equityChart.showSeries = nodes,payoff,index notes2 = The picture shows that the stock market is represented by a straight, diagonal line notes2+= You make money if markets rise, but lose money if markets fall pause heading = Let's think about protection subheading = Turning straight lines into kinked lines notes = notes2 = pause notes += - What happens if you are scared of losing money and want a safety net? pause notes += - Let's imagine you don't want to lose any of your £100 if the stock market falls equityChart.labelPoints = 0, 1, 2 pause equityChart.nodes = -0.2,0; 0,0; 0.2,0.2 notes = notes2 = This is a kinked line. This is exactly what Options do. notes2 += Options are investments that create kinked lines. pause heading = You can't get something for nothing subheading = There is no such thing as a free lunch notes = notes2 = pause notes = - Let's start with the kinked line we created before equityChart.nodes = -0.2,0; 0,0; 0.2,0.2 pause notes += - This is a safety net: if the stock market falls, our investment is protected pause notes += - The green area shows this benefit relative to the investment in the stock market equityChart.shadeDiffs = index pause notes = notes += - But you can't get something for nothing. This safety net will have a cost pause notes += - Let's look at how that line changes if the safety net costs £5 pause notes = notes += - This moves the kinked line down by £5 to bring it into balance equityChart.nodes = -0.2,-0.05; 0,-0.05; 0.2,0.15 pause notes += - It creates a red area where you are worse off than the investment in the stock market pause notes = notes2 = And that is the essence of Options – creating kinked lines where you gain in one area by giving up in another pause heading = How do we pay for this protection? subheading = Thinking differently notes = notes2 = pause notes = - What if we don't want to pay £5 for the protection? equityChart.nodes = -0.2,0; 0,0; 0.2,0.2 pause notes += - But we only need a certain amount of return over the next year? E.g. 10%? pause notes += - We can pay away any return over 10% to pay for the protection! equityChart.labelPoints = 0, 1, 2 equityChart.nodes = -0.2,0; 0,0; 0.1,0.1; 0.2, 0.1 pause notes = notes2 = Options allow you to choose how you pay for protection notes2 += You can pay for it outright, or change how and where you earn return pause clear equityChart.visible = false heading = Summary notes2+= The kinked line shows the outcome at the end of the time period and these trade-offs pause notes2+= The trade-offs can be shown against an investment in the stock market pause notes2+= This means you can know in advance what the outcome will be with complete transparency. How much money you can make and when, as well as how money you can lose pause notes2+= If you're still with us, our Training section covers other uses of Equity Options. pause clear equityChart.visible = false pause fade @InsertDoc training-slides-disclaimer